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June 11, 2009 / Toby Dayton

More Chaos Surrounding The Dailies

As I indicated yesterday, I have a huge backlog of daily newspaper, media, and advertising news items that have accumulated over the past few weeks and am trying to get through them in as few blog posts as possible, so here’s day two of cleaning out the closet…

• McClatchy is scrambling on multiple fronts to stay ahead of the avalanche crashing down around it. The company has restructured its debt, accepting a 3x increase in the interest rate it’s paying (5% to 15%) in exchange for an extension on the debt of a few years. In the head-scratching department, the company is also experimenting with an additional charge for subscribers who want the TV Guide with their newspaper. Really?!?!?!?

• There is little doubt that the Wall Street Journal will be out front leading the charge in charging readers for its content online. This is a good thing (if done the right way), and in one form or another it will work and it will be an important component allowing certain publishers navigate towards a long-term, sustainable business model online. Circling the wagons and working out an industry-wide program might be the answer, but the dailies just need to make sure they stay out of trouble with anti-trust regulators in the process. The trick will be balancing the need to generate a decent value proposition that warrants a paid fee and the urge to maniacally police the web for ‘pirated’ content.

• Another component of that sustainable business model will be individualized news. There has been countless attempts of this, and many, many failures, but eventually publishers will figure it out and it will become a standard component of news delivery, both in print and online. The latest attempt in this effort comes from MediaNews.

• Newspapers are now less liked than airlines. According to a recent report, the American Customer Satisfaction Index, newspapers ranked below airlines and cell phone companies in customer satisfaction. That’s pretty low.

• With all the chaos swirling around newspapers, it remains an active area for deal activity. This is likely to increase as papers work through bakruptcies, consolidate, shut down, develop new models, and begin arriving at new models that provide some prospects for growth and value creation. Despite the collapse of the industry, print remains an incredibly appealing media channel for consumers and advertisers alike, and that will likely remain so for decades to come. But at some point, all the newspaper debt holders that are quickly becoming equity owners are going to realize that they have less chance of successfully managing a daily paper than industry veterans (who deserve about a D- for their effort even with an exceedingly generous curve applied to the grade) and are going to have to sell at whatever price they can muster. Debt holders who hold out hoping that good days are going to return are delusional. Selling now at $.10 on the dollar is far better than nothing down the road, no matter how painful the write-down might be today.

• The New York Times continues to experiment with new advertising formats on its site. While some may be annoying and hopefully short-lived, readers should be patient and forgiving and let the Times keep experimenting until it eventually arrives at workable solutions. If brilliant campaigns like the Mac/PC ads are any indication, the future is solid for online advertising. I also credit the Times for raising its prices. I haven’t a clue if this will work long-term, but at least they’re aggressively trying to figure out what to do with their business to stay solvent.

• What is sure not to work, however, are weak attempts to launch new publications that are aborted before issue #1 even hits the street.

• As if more evidence is needed, Pew just released a new study showing how badly newspapers dropped the ball with online classifieds. This news comes just as online employment classifieds are beginning to rise once again.